(Provisional translation)

Monthly Economic Report
Executive Summary



(Assessment of the current state of the Japanese economy)

  Japanese economy is in a weak tone recently due to deceleration of the world economy, although some components still show steady movements.

* Exports are in a weak tone while industrial production is decreasing.
* Corporate profits which have been picking up show signs of leveling off recently. Business investment as a whole is picking up slowly while some weak movements are also seen recently.
* Firms' judgment on current business conditions shows cautiousness, mainly among manufactures.
* The employment situation shows signs of improvement, although some severe aspects still remain.
* Private consumption is almost flat while some weak movements are seen lately.
* Recent price developments indicate that the Japanese economy is in a mild deflationary phase.

 Concerning short-term prospects, movements toward economic recovery would pause for the time being. After that, the recovery is expected to resume with the improvement of the overseas economy while reconstruction demand lasts continuously. However, a degree of uncertainty about the external economic prospects of the Eurozone and Asia notably China remains high. Under such circumstances, further slowing down of overseas economies and sharp fluctuations in the financial and capital markets are downside risks of the Japanese economy. Also, attention should be paid to the changes in business profits and income, and the adverse effects of deflation on the economy.


(Policy stance)

  The Government will decisively work together with the Bank of Japan toward the exit from deflation which is the biggest challenge of Japanese economy in the short term, in addition to making its best effort in promoting the reconstruction from the Great Earthquake and in avoiding the slowdown of the economy. The Government will also make an utmost effort to prevent the economy from falling into vicious cycle between yen appreciation and deflation, and will implement seamless policy measures.
  Toward defeating deflation, reforming the economic structure predisposed to deflation is essential as well as appropriate macroeconomic policy management. Accordingly, the Government will deploy a broad range of policy measures intensively by FY2013 to mobilize "goods", "people", and "money".
  The Government expects the Bank of Japan to continue powerful monetary easing until the exit from deflation is ensured while working closely with the Government.
  The Bank of Japan decided to increase the total size of the Asset Purchase Program on September 19th.